Richard C. Longworth, senior fellow at The Chicago Council on Global Affairs, contributes his knowledge and ideas about issues that affect the Midwest.

Wednesday, March 03, 2010

Some Straws in the Wind

It's been a long time coming but the Midwest may finally be joining the clean-energy era.

Not that we're all going green, or that the region's tired old factory towns are suddenly blossoming with producers of clean-energy technology. But a scattering of news from around the Midwest makes it clear that, at last, something is happening.

Up in Michigan, the state has awarded Dow Chemical Co. incentives that will leverage $1 billion in investments for three alternative energy projects, including solar roof shingles, that they hope will create 2,500 jobs. Newton, Iowa, the town created and abandoned by Maytag, is trying to recover on the strength of two factories making parts for wind turbines. A wind farm in north central Iowa is about to supply electricty for parts of Wisconsin. Everywhere, clusters of turbines march like giant windmills across Midwestern farms.

Most recently, Milwaukee announced it had landed a Spanish-owned factory to make electric motors for wind turbine generators. The factory, owned by Spain's Ingeteam, is expected to provide 50 to 60 jobs within a year and, with luck, 275 jobs by 2015.

The Canadians want to put 700 wind turbines in the water on their side of Lake Erie and Lake St. Clair. Eventually, the turbines will generate power that could fuel industry on both sides of the border. Right now, though, the proposal is generating mostly protests from local NIMBYs who fear the turbines will spoil their view.

In the meantime, the National Renewable Energy Laboratory has issued a new report that triples the estimate of potential wind power that could be generated in the U.S. Of the top 10 state for wind energy potential, it says, five -- Kansas, Nebraska, the two Dakotas and Iowa -- are Midwestern.

I'm not sure what this adds up to. But it's obvious that clean energy, as a generator of jobs and investment, has moved beyond the talking stage and is beginning to impact the Midwestern economy. It's also obvious that this has just begun, and there's a lot more activity to come.

The Spanish investment in Milwaukee is especially interesting because it combines several factors that should be important to other cities and regions looking for similar investment.

Ingeteam's electric engines not only go into wind turbines but into railway and hydroelectric power projects. Both have a potential Midwestern future -- the railways, if high-speed rail becomes a reality, and hydroelectric if the Midwest makes use of its vast network of rivers to generate power.

Milwaukee, like other old factory cities in the Midwest, has seen its industrial base shrink and its factories close, both during the Rust Belt era and, more recently, in the avalanche of outsourcing that has accompanied the arrival of globalization. But if there's anything that Milwaukee knows, it' s manufacturing, including the manufacturing of electric motors.

Some local companies, like Rockwell Automation and ABB, still make electric motors there: there's a cluster there, a remaining base for Ingeteam to join. More to the point, there's a history of making electric engines, a residue of knowledge, an industrial memory. With this investment, Milwaukee is using a vanishing past to build a future.

In this sense, the Ingeteam project is both old and new -- a green project (wind power) and a traditional project (motors).

This isn't rare in the Midwest. Much of what the Midwest has always done -- making steel, cars, tires, furniture, TV sets, auto parts -- has gone away and isn't coming back. But a region that has always made things still understands manufacturing and the skills that propel it. The trick now is to take this industrial memory and apply it to the industries of the future.

Thus regions that made things from metal are looking to nanotechnology -- the creation of new, lighter, stronger metals and materials -- for their future. Akron makes few tires these days but is building its future on polymers, which are integral to rubber and much else. New auto research institutes are opening in southeastern Michigan to tap that region's knowledge of cars. Peoria is turning its whiskey-making past into bioscience: it's all fermentation, after all.

So when Ingeteam came calling, Milwaukee was able to say that they know electric motors, even if they don't make as many any more. Ingeteam wants the newest kind of motors of new, energy-related industries, and Milwaukee talks their language.

It talks their language in a difference sense. Ingeteam is Spanish, and Milwaukee has a substantial Hispanic community to provide workers. Much of that community lives near the Menomonee Valley, an old industrial area south of downtown. Mostly abandoned in recent years, it is being redeveloped as a new industrial site, and Ingeteam's plant will go there.

About $6.6 million in state and federal subsidies made this deal happen. There's much to dislike about these subsidies. They pit region against region is a bidding war to see who can throw the most money at potential investors. They take funds away from home-grown projects that will probably create more jobs in the long run. They lead to investment being driven by bribery, not by sound economic decisions.

That said, these subsidies are still a fact of life and most people in Milwaukee seem to feel they got their money's worth. The Ingeteam subsidies add up to about $24,000 per job. John Torinus, an online columnist for the Milwaukee Journal-Sentinel, says this is "less than half the going rate for similar subsidy packages," and about one-twentieth the bribes that states, including Wisconsin, offered for less promising General Motors' projects.

The key, Torinus says, is not to abandon subsidies or smokestack-chasing entirely but to keep them in perspective, using this technique when necessary but putting more emphasis on start-ups at home.

Milwaukee has other things going for it. It's getting serious about alternative energy: other manufacturers there have recently announced expansion in energy generation, efficiency and storage. The University of Wisconsin at Milwaukee is setting up a freshwater research institute to exploit the commercial assets of Lake Michigan.

Milwaukee, in sum, has leveraged its industrial history with a comparative advantage in electric motors, a cluster of existing companies, an ethnic connection, some enlightened governmental help and a general realization that the good old days of heavy industry are gone. The upshot is a toehold in the new economy.

Many other Midwestern cities and regions have similar assets. Some are putting them to use. The region's future depends on these straws in the wind turning into a gale of progress.

1 Comment

Pictured in the show are several of those former Maytag employees that are now building either wind blades at TPI or towers at Trinity. These two companies alone are now employing over 775 individuals in the region.

Last week we also celebrated the opening of the NextEra gear repair facility in the Iowa Innovation Gateway region located in Story City, Iowa which will repair the heart of the turbines.

For the Iowa Innovationg Gateway region and all of Iowa, this growth in clean-energy is very real and allows us to leverage our manufacturing heritage!

The Global Midwest Initiative of The Chicago Council on Global Affairs is a regional effort to promote interstate dialogue and to serve as a resource for those interested in the Midwest's ability to navigate today's global landscape.